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July 10, 2021 at 10:00 AM in reply to: San Diego drastically outperforms Bay and LA on rents #822426
EconProf
Participant[quote=gzz]Metro Dallas prices are up 25% YoY and inventory down 67%.
https://ntreis.net/download/may-2021-monthly-market-indicators/?wpdmdl=8305
While a big outperformance of national prices would feel good, a national boom is more sustainable and lets our prices grow without hurting our competitiveness.
Longer term, I think Prop 13 and the lack of developable land make SD a better investment than places like Dallas and St George. At some point construction parts and labor will get more reasonable and housing prices there will decline to marginal cost + a fairly small location premium.[/quote]
I agree with you that the lack of developable land in San Diego raises prices and rents. Add to that the influx of people from the even worse-run cities in the Bay area and LA, and San Diego prices and rent will benefit. But San Diego is tied to CA, which competes for worst-run state with the likes of New York, Illinois, New Jersey, etc. For years, CA ranks as most business-unfriendly, highest percentage of people in poverty (despite lavish welfare programs), and is tied with NY for highest taxes. Example: We have, by far, the highest gas tax and are tied with Rhode Island for worst roads in the US.
So as the new exodus from CA (Census Bureau) continues, San Diego will always have its ocean, mountains, and weather to benefit real estate investors. But these benefits could be outweighed by other factors. People can vote with their feet.ParticipantMy detractors here disagree with me mainly because I am looking at long-term trends in demographics, governmental policies by state, and COVID-influences on changing workplace choices by businesses and individuals. The current and recent bounce in SD prices and rents are due to its haven for escapees from the Bay area and LA, the sugar-high of temporarily low interest rates, its everlasting shortage of buildable land combined with nimbyism, and the ongoing appeal of San Diego for its weather and amenities. In future years these advantages will be offset by the differing governmental policies among the states. The exodus from blue states and cities to red will continue and likely accelerate. COVID-induced changes in the workplace has pushed people to outlying suburbs of all the big cities, but also prompted the high-earners to pick low-cost, low-tax areas and “check in” at the home office in the big city only when necessary.
These likely future trends are well-documented, and it is not surprising that many do not agree.ParticipantGiven all the above well-documented trends, here are some questions for readers of what all this portends for San Diego’s future:
1. To what extent are LA’s and Bay area’s homelessness problems (and their government policies that enable it) fueling their population exodus?
2. To what extent are SD’s rent gains and house price gains due to arguably better government and conservative reputation (albeit now rapidly changing)?
3. Since CA state policies affect all 3 of these big cities, and said policies combined with our weather attract the homeless from all over the country (and now, from the world when they come to the US and pick a state to live in), what will San Diego’s future look like in terms of demographics, fiscal situation, cost of living, and attractiveness to business?ParticipantDrought conditions exist all over the Southwest, St. George/Washington City included.
Yes, the proposed pipeline is controversial, since all users of water in these states are in competition for water, which is mainly from the Colorado River. But fast-growing areas like St. George naturally fight for their own interests. BTW, lawns are largely non-existent in new housing developments.Participant[quote=sdrealtor]My neighbor went to Idaho. He complained about all the things in CA he didn’t like. Truth be told he made money here he never would have made anywhere else and now doesn’t want to pay taxes or give back to the system that made him wealthy. He sucks. I’m glad he left
Utah is growing on the excess overflow of CA. If CA suffers Utah is toast. There is nothing unique or remarkable about it other than a few national parks[/quote]
sdr, you often make some good points and add useful data to Piggington. But sometimes your emotion shows and you get too catty or irrational.
“If CA suffers Utah is toast” for example. The data is clear that as CA deteriorates, based on many metrics, people flee to other states. So what exactly do you mean?
Also, you dwell on the past and project it into the future. Yes, CA RE in the past outperformed most other states. Right now, CA RE has the veneer of prosperity, as do most other states and cities due to COVID handouts and temporarily low interest rates. But the policies are in place to make the big cities of CA less livable in all except gated communities. The sugar high SD RE is experiencing is due to an outflow of the wealthy from the Bay area and LA. When combined with our limited land to expand and our silly environmental regulations, of course existing RE goes up. But SD is following the policies that made those two coastal cities crappy, so we will follow in their footsteps.
While you dwell on current and past data and anecdotes from your own experience as a broker, I am bringing up underlying trends that will loom large in future RE values.
That said, I enjoy your solid data about North County Coastal and Mira Mesa Monitor.ParticipantWhoa, guys, calm down.
Let’s get back to my original thesis, that CA is now losing population (census bureau) for the first time in its history, and that will affect RE in the long run. Largely because of government policies at the state, county, city, and school board level, CA has the highest or next-to-highest taxes and regulations, delivers the worst services (schools, roads, prisons, etc.) compared to nearby states, and has the nation’s highest poverty rate when cost of living is taken into account. These trends will only worsen as CA’s policies attract the homeless, welfare-dependent people from colder states, and now, from the world. Incentives matter, and the poor move accordingly.
They will saddle CA taxpayers and businesses with an even greater burden in the future, so taxes will rise and the exodus will accelerate, especially for higher-bracket taxpayers.
CA’s finances today look OK due to the flood of federal COVID largess and temporarily low interest rates. But history shows there is a reckoning in the form of stagflation in the near future combined with vastly higher interest rates. Long run, it does not bode well for CA real estate compared to its neighbors.ParticipantThanks Flyer, and you are quite right that the move was prompted less by financial motives than other factors.
Commentators on the left and the right agree that the nation is dividing into two geographic directions, or what could be called factions. The big cities, especially coastal ones versus the inland ones, the latter perhaps including the ex-urban parts of all cities.
Given current trends, I want to be part of the inland, more rural part. The culture, politics, and friendliness of the people are entirely different. We will never buy motels to house the homeless and addicted or free repeat-criminals from our jails or teach school children to be race-conscious. We won’t close our schools unnecessarily. Our taxes and fiscal future will stay healthy, crime rates will stay low, and education levels high. Our influx of escaping “refugees” from the woke cities will continue.
As a long-ago liberal–it’s hard to be a college teacher and not be liberal–my entry into the private sector via real estate investing and being a contractor in the inner city gave me a rude awakening.
Of course much of this change is due to simply getting old. As Winston Churchill said, paraphrasing, “To be young and not liberal is to have no heart. To be old and not conservative is to have no head.”ParticipantSome observations from living here in St. George/Washington City for 4 weeks now.
The people here are friendly, overwhelmingly white (a mixed blessing), young (Utah has the youngest state population), and athletic. Hiking, bicycling clubs abound, gyms aplenty, and everything is cheap, from gasoline to restaurants, to taxes. Ethnic restaurants aplenty, and I count 8 Thai restaurants for SDR to try. No ocean views, but snow-capped mountains visible from everywhere in town. Last of the snow just disappeared however.
Our Brio development of 800 or so homes is about half built out. Since prices are going up so fast, the developer is no longer setting a fixed price and then committing. Instead, you get to bid on a finished product, and then it could become a bidding war. Average time on market for homes in town is 6 days. The broker sets a price, then gives people 5 days to come in with their best offer over that–all cash or pre-qualified only need apply.ParticipantWill do SDR.
Remember St George is high desert, so is noticeably cooler than Las Vegas. 110 degrees is not common. And there’s a 30 degree swing in temperatures, so mornings are OK.ParticipantLet’s revisit my claim of ‘ominous trends” for San Diego and CA I mentioned that got a lot of criticism. CA’s now declining population is a result of many “push factors” that are causing people and companies to make the very exensive decision to leave. Our taxes, utility costs, homelessness, and increasingly leftist government at the city, county, school district, and state level are driving this exodus. None of these trends show any sign of reversing. If you are in RE in any capacity, you know that your estimate of the future should determine today’s opinion and actions.
San Diego’s relatively good RE picture today may be largely due to the well-off buyers fleeing the more disfunctional LA and Bay Area cities, as others here have mentioned. But the same push factors are now becoming evident in SD.
People and businesses are fleeing the difunctional cities and states at an accelerating rate which could well accelerate if there is increasing civil disorder. Great weather and beaches are nice, but not enough for many people and businesses.ParticipantThanks to all for the feedback, both positive and negative.
We’ve now lived here for three weeks, and it is exceeding our high expectations.
Regarding California’s population—it is declining in absolute terms. If you believe otherwise, your information is old. Census comes out with annual estimates in the first quarter of the year, and then as more data comes in gives us a revised member in July. The very latest figures show a decline.
This is in marked contrast to California’s reputation as a destination, and for decades that reputation was deserved. But the rate of growth has declined for about five years and the latest revision shows an absolute decline.I call this an “ominous trend”. Piggs are free to speculate on the causes, but I believe the Census figures and expect them to accelerate in the years ahead.
ParticipantBarnaby, your math is correct, I am in my 70’s.
Ominous trends? Please explain how that is relevant.
Sophistry: “The use of fallacious arguments, especially with the intention of deceiving” according to google. Please explain, and as I used to tell my students, be specific. Show your work…ParticipantActually I made quite a lot on houses, apartments, and commercial properties, to the point where landlording income dwarfed teaching income.
I mentioned El Cajon because that was a typical blue-collar suburb then. As you must know, coastal properties in San Diego have appreciated much faster over the decades than inland.ParticipantA bit of history about San Diego from this geeser. When we first moved here so I could teach at SDSU, 45 years ago, CA was the land of opportunity–the Golden State. Pete Wilson was the San Diego mayor, later CA senator. CA was Reagan country and the government was efficient, taxes were reasonable, and politics were competitive. A 3 Br, 2 Ba house in the suburb of El Cajon averaged $45,000 in price, the same as the national average. Now the left owns the state, government unions control K-12, the universities, and virtually all city, county, and state offices. Our high taxes, draconian regulations, skyrocketing utility bills are what make CA houses cost three times what the same house will cost in Utah, AZ, Texas, etc. Which explains why CA population is actually shrinking of late in absolute terms. Yes, we have our great weather, the ocean, and hip culture. But the trends are ominous, and the future is dire compared to that of our neighboring states.
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